Let's talk about Power. Thank you for joining us today in person as well as virtually. Although I feel a little bit sorry for the people who couldn't make it in person here, because I can see from the faces they loved the experience they had listening to the people who literally keep our planes up and running 24/7. I hope it was a very good experience for you on board. That's a capital markets day, as we call it. We've been talking about this for a long time. The main content of the event is going to be strategy. For those of you who are expecting to see detailed financials, probably I'm going to disappoint you on that one.
We're not going to be going directly into those financial projections or financial results, which is going to come up in the year-end results, earnings call that we have. Before I introduce people, just a quick one. The format of this meeting is going to be similar to the earnings call, which means that I will request all of you to keep your questions until the end, and there's going to be a Q&A session for you, as well as the people who are joining virtually. Together with us today, we have some familiar faces as well as probably ones that for the first time meeting in person. I'll start with Mr. Raad Al-Saady. Raad is our Vice Chairman and our Managing Director. Raad, may I request you to give a few words about yourself?
Nice to meet you. I met you briefly during lunch. Marco invited me today. Thank you very much, Marco. We had the board meeting yesterday at ACWA Power and he asked me to join, and Marco always gives me the same advice to keep an open mind and to keep my mouth closed. I will do that today, but I just wanted to say a quick hello and we continue with the procedure. Thank you.
Thank you, Raad. We have Marco Arcelli, who is our CEO, who is essentially running the session today. Every now and then, he's going to pass the word to the relevant members of the management team. But essentially, he is our guy today, and he's going to take us through the strategy in detail. We also have Abdulhameed Al-Muhaidib . Most of you know him. He is the CFO of ACWA Power, and together with him, we've been making some miles this year. I think we've been meeting most of you in person. On the other side of the room, I have Mr. Reham Al-Beltagy, who is our Head of Corporate Affairs, and he's also looking after sustainability and strategic as well as strategic development. Next to him is Thomas Brostrøm.
Thomas has actually joined us very recently, but I am sure it feels like more than several years, Thomas. Thomas is our Chief Investment Officer. Next to him, we have Bart Boesmans. He is our Chief Technology Officer. He is overseeing technology, generally speaking, but he is also responsible for research and development innovation. Next to him, we have Driss Berraho. Driss is our Head of Green Hydrogen. I am delighted, excuse me. I am delighted to have Driss here because he is the person who can give you insight into a lot of questions in green hydrogen, which Abdulhameed and I have been receiving also. Without further ado, I would like to give the mic to Marco Arcelli and we can start. Thank you.
Thank you. To move the slides, do I click or do I comment them?
It is going to be there.
There. Okay, good. Excellent. Welcome to everybody, and I am very happy to be here with you. It has been an exciting almost nine months. Really a lot of things happened. It feels like nine` years, but you know how things go in the region. I think it is not just ACWA Power. Let me start by telling you and reiterating what Ozgur Serin said. I think that the goal today for me was really to share with you basically the thought process and the rationale for the strategy that we launched in June, and we are now delivering. We will not give you a lot of numbers. We will give you just a few that I think are relevant for you, and we can discuss later on in more details.
ACWA Power, one of the things that we started to do is to communicate more and better what we do and what we are. Because when I arrived, I realized that no one, not even myself, knew that we are the largest private water desalination company in the world. That is one big theme that we are developing right now, and we will talk about that. W e are the largest private power producer in the Middle East, which we will decline in a few different themes. We are one of the biggest companies in the world in energy transition, which includes battery storage. That is another part that is not very well known. W e are the first mover in green hydrogen, among other things that are the renewables and the combined cycles in flexible generation that we do.
If we can move to the next slide, you see here a snapshot basically of what we are today. C lose to 55 gigawatt under control. You know our definition. B asically, it is the asset in operation under construction and for which we have signed PPA. That means that we are going to start construction soon. T his is like 100% certain of delivery. We have a much bigger pipe and beyond that, and we will talk about that. 7.6 million cubic meter of water per day of desalination, which to give you an idea, in the four countries where we operate today, we fulfill the needs, the demand of about 20%-30% of the population. That is Saudi Arabia, here we have Emirates, Oman, and Bahrain. 1.2+ million tons of green ammonia because we have the 1.2 from NEOM, plus we just launched a second project in Uzbekistan.
It is a smaller project. It will be a few tens of thousands in the first phase, but we have already launched a study basically to see how we can export then the green ammonia into Europe. 5.3 gigawatt hour of battery storage, which makes us probably the largest battery storage operator in the world. That is as much as all of Europe installed in 2022. W e started to do this basically only four years ago, three years ago. Total asset under management is $84 billion. I think it was $76 billion, $77 billion when I arrived. I t gives you already the idea of the pace of growth. T his will be the key figure from which we will give you the target by 2030, and we will explain to you also why we don't break it down into more targets. 45% of the capacity today is renewable.
It used to be practically zero only seven, eight years ago. I mentioned larger private producer in water desalination, the first mover in green hydrogen, energy transition. I think the two last points are very important. W e are the guys who took down the cost of renewables by 80% over the last 15 years. We achieved still the world record of the cheapest power from PV in Saudi Arabia. I n water, we achieved similarly the lowest tariff in the world at a plant near here, Hassyan, that we start construction immediately, in a few weeks. SAR 0.365 per cubic meter. T he last point is also very important, and if we can move to the next slide, is that we are a global champion under the Saudi program.
I think that here it represents. Actually, this is what I started to look at myself, to learn about the company and see, but what is the recipe? What should we do more? What should we do differently? I think that you can see these three phases. The first one was a domestic company until, let me say, 15 years ago, when the first opportunities were in Saudi Arabia. Then you grow, you win the first projects, you position yourself, you start building the equity. That allows you then to go internationally when the opportunity in Saudi Arabia were not so big. You see that the growth in the next decade was basically driven by this. T he big acceleration, what really made ACWA Power what it is today, is Vision 2030.
The fact that Saudi Arabia put in action this plan to decarbonize the economy under Vision 2030 as one of the pillars, to promote private entrepreneurship. Otherwise, this would have gone to private public player like Saudi Electricity Company or Saline Water Conversion Corporation. Instead, they say we want to foster a private economy. You see that is when we really made the big jump and exploded. We are now today responsible to delivering the Public Investment Fund program. That is basically this program to build 70% of all the renewable capacity in Saudi Arabia. If we move to the next one.
By the way, this size, this scale is also what enable us today to go abroad with a different way than we had before, and to be also a kind of like a hand in hand with the government in the countries with the biggest relationship exposure and bilateral trade.
How did we get there? I told you about the big reduction in cost that we achieved, both in power and in water. I think the other is that we are increasing it. I think after you start from the first phase of your life, where basically you are focused on establishing yourself, now we are focusing on changing the world. I think these examples here, like the Hassyan IPP here not far from here on the coast, to convert it from coal-fired to gas fire, talking with the local authority, the local off-taker, to say why don't we change it along the way? This is saving 30 million tons of CO2 by 2030.
The second one is Shuaibah, which is an independent water production plant in Saudi Arabia, where it used to run on oil and with regular traditional condensation, basically distillation process, which was converted to reverse osmosis powered by electricity, which enabled to reduce the consumption by 22 million barrels and almost 10 million tons of CO2 equivalent. This is increasingly what we want to do. The presence in green hydrogen is also part of this. Driss Berraho will talk to you about that a little more in detail. W hat we see is that, and we were just at COP, it's not that we have to talk about renewables today. Renewables are happening as much as you can. If you don't do renewables, it's simply that you need either a complement in the system or you don't have enough capacity or enough land.
N o one is questioning that renewables are the cheapest, safest, the fastest, and they're going ahead. What we need to focus on is the hard-to-abate sectors, for which it is an emerging industry, and that's where we're focusing on today to see if we can replicate and with the ambition to be the number one player like we have done in these other technologies. If we move to the next slide, this is the example. There are a couple of examples that I would like to show you with concrete pictures because I think this is really telling. T his is The Red Sea project, and Bart Boesmans was really at the center of it because it's all about technology. This is not about construction. This is the largest off-grid, fully sustainable solution in the world.
It's 500 megawatts of fully renewable energy, 400 megawatts solar and 100 megawatts of backup bio-fuel engines, together with 1.2 gigawatt hour of battery storage to ensure that basically you have power and water and wastewater treatment 24 hours a day. B y the way, this means that the reverse osmosis plant there for 32,000 cubic meter per day is fully 100% powered by renewable energy, which I think is also another leading record in the world. The first resort just opened, Six Senses. It's working fine. We're still feeding the whole construction camp and living quarters for all the staff, and the next two, three resorts are going to happen in the spring. I t is really there.
What I want to focus on is this picture here, that basically shows one solution that we developed with the old sustainability program of the Minister of Energy and Red Sea Global. B asically it takes all the wastewater from all the resorts, channels it to these pools, to these ponds, where basically all the nutrients are left there. W e grow mangrove wetlands. These are 20 hectares of that. Y ou see that there is room for expansion. It's part of the Saudi Green Initiative. B asically we're turning the waste into green, and then the rest of the water goes to the nursery that will be used to provide the plants and the trees for the landscaping of all the resorts. 30 million plants between now and 2030.
If you consider that the whole of Saudi Green Initiative is one billion trees, this is a pretty significant contribution. The next one is green hydrogen. Well, this is a rendering. Next time we can show you actually the physical pictures of the progress. I went there in July, and it's incredible. Y ou see a lot already going on. The wind turbines, where the first wind turbines were delivered to site about a month ago, they're starting to be installed. The solar panels and the solar farm basically is going on. T hen you see basically at the site on the coast already the foundations and the steel structures of all the main buildings, the tanks for storage, that are coming out the ground. This is the largest project in the world fully dedicated to export in green hydrogen.
I would say probably it is also one of the largest, or if not the largest green hydrogen project in the world because, to give you an idea of the size, the United States just inaugurated the largest plant in the United States for green hydrogen, is three tons per day production. This one is 600 tons production per day, so it is 200,000 VP. If we move to the next slide. This is the long-term trajectory for us, a net zero by 2050. I know that we have not yet provided a lot of details of how we are going to reach it. I think that the view that we have is first we are going to do, and that is something I also picked up also at COP, that I think we are starting to get pragmatic about the energy transition.
I come from Europe. Many of us come from Europe.
We saw the disaster that we made with energy policy in Europe, with Russia, where basically to face an issue in the system, a geopolitical issue, you had to restart coal, and basically you had energy that was more expensive and more polluting than before. B efore we focus on I need to be net zero soon, let us see the trajectory. T he trajectory for us is the next 30 years where we say first we do all the renewables we can. We have a big pipeline, we will tell you a little bit about that. The second is we still, we do combined cycles where they are needed.
It is not that we are going to go to a country and push them and say, "I am going to build a combined cycle for you." I n the countries where you need to have this energy for the next 20, 30 years, we will continue to do that. We see that that is mainly Saudi Arabia, which is converting the oil-fired into combined cycle. Uzbekistan, where we are building already 1,500 megawatts that are actually started production and another 1,500 we expect to come in the future. We see it in Bangladesh, we see it potentially in Morocco. We see selected in some countries. It is not going to be the bulk of our portfolio, but we will continue to do it.
In the meantime, we start looking at the technologies that allows us either through sequestration or then the natural end of the life of these plants, and we will address that in that way. Next. Again, we move to the strategy that we put in place. L et me start by the vision. All these three points are one connected with the other. W hat we said is what really made ACWA Power great is the people. W e really need to focus on people, not only attracting, keeping, retaining, but also developing, make sure that we become really a management school. I always say that today we need to ensure that we do not have too much attrition, but as we grow, it is good to have attrition because it means that people take your people because they are the best.
We have to build a system that will continue to generate the talent and will attract the talent. The second is to become more recognized as a thought leader in the industry. We have done all these things that I described and much more, but not a lot of people know, particularly outside of this region. I think maybe some of the recent stock price came from a little better communication that we have done and more focus, particularly on water, I think. It is not that we do it for the stock price, but we do it, again, because we want to attract people so that they come and they make us better, bigger, and more successful.
The third one is all this, if I am recognized and if I have the right people, then naturally I am the best person to offer partnership for growth in all the countries where we operate. Which at the same time is what feeds the fact that if I create opportunities for growth, people will come to me. If I do a lot of things, then of course I am always innovative and I will create opportunities to position myself in the industry. That is why these three, people, the recognition, and growth are the three main things that we are working on right now, and they all feed into each other. Next. I would like to add one thing about people, because we recently had, a couple of nights ago, a nice dinner to celebrate Paddy who left the company.
We recognize everything that he has done. It has been really a remarkable success, I think, and this is something that I am sure that it would be told in history books in the coming years. We reflected and we say, "Listen, we are still successful. We are still very good performance. We win, we grow, we are recognized." I f you look at us, there is basically only Abdulaziz who was here five years ago in the management committee. That means that we are strengthening the organization to go beyond the individuals. I think that that is a big part of what we are trying to do as a management team right now. If you want is to make each one of us redundant, potentially, by strengthening the organization, both organizationally and with people that we attract.
All that translating to this, which is probably the only and most meaningful number that we will mention, is this $250 billion. Basically it is tripling the size from where we were early in the year. In these four verticals, which is one renewable, the second is water desalination, the third is green hydrogen, and the fourth is flexible generation. As I mentioned, we do battery storage. Today, what is battery storage is mostly connected to the renewable generation. I n some countries selectively, we will see that there might be an opportunity, so we might pursue it also as a standalone business. We elected not to give you specific details about what is the ambition in each one of these technologies. The reason is that we want to maintain the flexibility. Of course, we follow the market.
That we are going to do a lot of renewables, that is clear. That we are going to do a lot of water desalination, that is clear, but it is the smaller industry. O f course, if you are very successful there, you could be a higher number or a lower number, depending on how the industry develops, which is even more the case for green hydrogen. The fact is we have a total capital allocation that we have tentatively done, but then it depends, of course, particularly for some of these industry, depend on what pace it will follow in development. We will work in four main regions. Saudi Arabia, which will continue to be at least 50% or 60% of our investments. China, where we build on the fact that we have been there for 15 years with partners. We have procured more than $30 billion.
They invested more than $10 billion in our projects, so the relationship is deep. We are going to grow there, and I think that that could be a significant portion of our 2030 exposure. We will continue to work basically in Middle East, Africa, so the rest of the Middle East and Africa, and in Central Asia, where we will have a small focus. We will continue to develop organically, but for Africa and Southeast Asia particularly, we will also look for consolidation. We will increasingly look for acquisitions if they are available at the right price, because some of these regions are very small, fragmented, they are slow. To become material, you need to be open to this. Sometimes it is also a good proposition for consolidation in their markets.
I f you think about it, I always put it this way, that the biggest developer in Africa over 15 years reach 1.5 gigawatt, two gigawatt of capacity. The biggest, and we are one of them. We do 1,500 megawatt in one project in Saudi Arabia with one tenth of the effort, basically. T hat is why scale there will be important, and that is why consolidation will be one of the opportunities. The last point is more operational, because renewables are very competitive, very small margins, and so we need to really sharpen continuously our approach. There we have created under Bart, this group, that will take care of strategic supply and framework agreement, potentially different ways of contracting from through EPC to EPCm, and we continue to do the R&D, to ensure that we remain particularly competitive. Next.
I now will provide you a short and small focus on the key areas. For Saudi Arabia, as I mentioned, we are responsible for delivering the PIF program. How much is the PIF program? It is 70% of whatever we build. How much is that? The official number today is 58 gigawatt, and so our share is 42. You see here more or less what we have done so far, which is about 14 gigawatt between assets that are in operation, in construction, or for which we have signed the PPA or are about to sign the PPA, and the rest we expect to be awarded in the next three years. T hat basically reaches operation by 2030. However, you saw already Saudi Minister of Energy, who mentioned that recently the 20 gigawatt will be tendered in 2024. That includes both renewables and conventional flexible generation, CCGT.
I t gives you an idea that this could be higher. If you look at the demand that was, the demand growth last year was 8%. Saudi is the fastest growing economy in the G20. Besides all the giga projects, we now won X for 2030. I think that there are a lot of signs that maybe this could be exceeded. The other point is that besides the 70%, in the 30% we can still participate, and we won 1.1 gigawatt today on the tenders that were put out. Next is Central Asia. What we wanted to do, and here it's always a bit difficult to tell you, how much we are doing there. Because actually, the agreement we have with Uzbekistan government is bigger than what we show here.
What we show here is where we have already signed the PPAs, are under construction, or for some of these, we are already starting to dispatch energy. Azerbaijan, we have 240 megawatt under construction. A gain, there we have a further MOU for onshore one gigawatt, offshore 1.5 gigawatt, so there's more than that. We just signed the JDA in Kazakhstan for another gigawatt, where we think that the potential could be similar to Uzbekistan, simply looking at the size of the country, the economy, the population, and the potential that it is. This is the second biggest region in the short term that we're going to invest. Interestingly, I would like to mention the last point at the bottom, because increasingly I think that we need to partner, and we partner everywhere, so we keep 30%, 40% of the equity at the end.
Some of these, we're starting to say, "Why don't we partner with strategic partner ahead and put together all the forces so that we accelerate what happens or what needs to happen?" This is the project that t he agreement that we signed with Masdar and State Oil Company of the Republic of Azerbaijan, for a project in Azerbaijan, in Nakhchivan, which is in enclave, and so it will be probably for export into Turkey. That's why we put together us, Masdar, State Oil Company of the Republic of Azerbaijan, which is both Azeri local but also a large consumer in Turkey. That's increasingly to give you an idea of how we are working and what are the target. Next is China. China, I think I mentioned already, we come from first the strong G2G relationship, a strong B2B relationship.
I think the meeting with all the authorities when we started to position ourselves for investments, because of course, first you enter a country, you get to introduce yourself, and you want to see if you're welcome. I think that we're very welcome, not only by the central government, but particularly by the provinces. I think here there is an interesting window, because the economy, of course, everybody is talking slowing down, but the desire and goal to decarbonize are extremely high. Basically that could be the way to mitigate the impact of any slowdown. We see that a lot of provinces are really attracted by bringing foreign direct investment into their own provinces. We think that there is a very good pipeline of opportunities in 2024, 2025. We hope that we will be announcing the first deal shortly.
We already have shortlisted five to eight projects that could come to a conclusion in the next year. I think here the interesting model is that it is still contracted, we have a long-term PPA, so similar model. The problem here, or the problem, what we need to assess better, compared to the usual way of working, there are two things that are different in China. One is that the tariff is not necessarily fixed for all the term, but it is readjusted on an avoided cost. The second are curtailment. These will be the two biggest thing that in our due diligence for the projects and for the focus on which provinces we are going to target, we will focus on. I think that altogether, it provides very interesting free cash flow, very interesting EPS, and very interesting returns compared to other areas.
I think on balance, it is exactly the great complement to a strong position in Saudi Arabia. Next, I think we are going to green hydrogen, so I will pass it to Driss.
Thank you very much, Marco, and good afternoon, everyone. I think as Marco mentioned earlier, green hydrogen is definitely a, how say, the market that will really take off as far as really getting access to even more renewable energy into the primary energy system. If you look at hydrogen today, it is already a roughly 100 million ton market. If you were just to decarbonize the current use of hydrogen, it is already a huge opportunity. The beauty of hydrogen is that because we can produce it without carbon to renewable energy and the electrolysis process, this offers the opportunity to decarbonize what we call the hard-to-abate sectors that we cannot electrify directly. That is roughly 20%-30% of the primary energy demand.
By 2050, if we are to project the full decarbonization of our energy system, we are only talking about anywhere above 500 million tons of hydrogen. Again, a tremendous opportunity. By 2030, we will likely be somewhere in between. If we are fully on track to be net zero by 2050, we will be anywhere around 85 million tons per year. Again, a tremendous opportunity that we think that we can definitely play today. Why? We are a large renewable player. We are one of the lowest cost producer of renewable energy, and these are some of the most important ingredients to produce green hydrogen at low cost. On top of that, we are blessed with the other resources that are required. L and in our region, naturally in Saudi Arabia, of course, and the geographical positioning.
We're at equal distance to the key markets, in the immediate term, which will be Europe and the Far East. A few words about the NEOM Green Hydrogen project. This is the first project we have decided to make investment into. This is the largest green hydrogen project in the world. This will be producing by the year 2026, 1.2 million tons of green ammonia in the northwestern part of Saudi Arabia. In terms of capacity, we have roughly four GW of renewable energy capacity combined of solar and wind. With that, we are able to deliver one of the most competitive effectively output in terms of green hydrogen for export.
Based on this project, I think we are gaining tremendous amount of experience and know-how through effectively our engagement with the supply chain and internally as well, building up our internal capabilities to be able to now go outside, in Saudi Arabia and outside Saudi Arabia to develop more projects. I n the short term, as I was mentioning earlier, I think that the three main usage today that we have for hydrogen: methanol, ammonia, and ammonia goes primarily for fertilizers and other chemical applications, and the refining business. These are the natural, I would say, attributes for hydrogen. This is roughly, let's say 3%-4% of the global emissions. That's an immediate effectively replacement. T hat's the infrastructure exists. It's a cost issue only. The next effectively and most promising item are aviation and shipping.
We're talking here about 4%-5% of the global emissions that will be decarbonized. Shipping is definitely high on the agenda. Ammonia and methanol can be utilized directly very soon with the technological advances. We're talking about a few years from now to have the first ships already under operation. Green steel, that's a huge opportunity again. We're talking about 8%- 9% of the global emissions that could be decarbonized with green hydrogen and of course, heavy transportation. What is a bit more subject to debate, I would say, is maybe a light-duty transportation or high-temperature applications. It's competing with direct electrification. It's not clear whether hydrogen will be effectively fully capturing that or not. There could be some space for it. Maybe one last item to mention is power generation. That's not the most obvious application today.
I think in most of the world, we will see hydrogen entering the power business towards the latter part of the period. Simply when we have put, let's say 90% of renewable in our system, we still need to decarbonize this last 10%, 15%, and this is where hydrogen will be serving as a kind of a balancing or energy storage mean on a seasonal basis. There are a few countries where they don't have this option actually to push to that many renewables. Japan, for example, Korea, and they will be looking to procure green hydrogen and green fuels already today. We're seeing that because they are issuing tenders to procure ammonia, for example, in order to decarbonize their power system.
Based on that realization, I think that we have been working on building a pipeline in excess of three million tons of green hydrogen distributed over 10 countries. Our focus as far as countries are concerned, of course, countries we operate already, and in most of the countries we already have renewable capacity under operation or under construction or under development already. Most of these countries happen to effectively as well have these characteristics that are required to be competitive for green hydrogen: land proximity to the target markets, and as well the renewable energy resources. In terms of regulation, we see 2024 really as a pivotal year.
Right now as we speak, Japan and Korea are finalizing the draft of their policy, the policy that will go into parliament to finalize effectively the targets for green hydrogen and the support mechanism that will be there to allow the first imports into the country. In Europe, the Delegated Act has been passed already in this term. It is now being translated to go at the level of each individual country that will now formalize the obligations of each individual country to import green hydrogen. That is roughly already four million tons identified based on the Delegated Act. China, we will definitely be looking at China. China play effectively on two aspects. China today is the largest producer of hydrogen. It will be the largest market for hydrogen consumption growth. China, we need to decarbonize. That is obvious thing.
Second, for us, China will be very much strategic from a supply chain perspective to ensure that we effectively are able to scale up and deliver the lowest cost green hydrogen possible in the world. We will be leveraging projects done in China as well to be able to export that competitive advantage outside. Few projects that have been announced. Uzbekistan, next phase after the one that we broke ground. Indonesia as well, we signed our JDA for a roughly $2 billion project there. The next one that we will be announcing will be Egypt.
Next, please. Thank you. Now moving to water, which as I mentioned, we started to give a little more emphasis. This is a track record of what we have achieved today. O ur credentials, the largest seawater reverse osmosis plant in the world, the lowest desalination tariff, which we achieved more than one time. The first in the world with a hybrid PV and reverse osmosis, which we achieved for about 25%, 30% of the demand, both in the Emirates and in Saudi Arabia. I mentioned reciprocal also really in this category, not just the scale, but individual solutions that we have developed, put ourselves at really the forefront in the industry. Next is where we see why the industry is becoming so important and why we should position ourselves. You have seen that basically the level of water stress around the world is increasingly everywhere.
It's driven by climate change, by the growth of population, by network losses. We think, by the way, that since 40% of the population is within 100 kilometers of the coastline, that could be an effective solution also for a sustainable use, because basically we don't waste all the water that today is wasted in the pipe. Depending on the countries, 20%- 50% of all the water that is captured. Next. Is reflected in these figures that basically shows that the total capacity is expected to grow 60%, 70% in the next five years. The fact that we achieve such low cost is increasingly bringing governments or local authorities to contact us and ask for our support basically to develop desalination. We receive calls today from Mexico to Europe to China. It's really from all around the world.
Actually, to tell you more, I received one from Mongolia, and I said, "Oh, but you don't have the sea. W hat do you think?" They say, "We have big salted lakes." Even salted lakes, and now we are looking potentially, there's a tender coming up in Azerbaijan we're discussing with Kazakhstan for the Caspian. It's really something that is picking up a lot of momentum, and we want to capitalize on that. Next. We wanted also to put a little focus on environment because a lot of people say about desalination is not really environmentally friendly. Again, I think that we were a bit surprised by some of the statements that are made about water desalination in general. Maybe it's because it's not very well explained.
Here to give you an idea, first is the fact that we continue to make it more efficient. If you had in mind what water desalination was 15 years ago, 15 kilowatt hour per cubic meter produced. Today, it's 2.7. We're driving it to be two kilowatt hour per cubic meter produced. Of course, that makes it much more environmentally friendly. We have reduced with real-time monitoring of the quality of the system, basically to reduce the use of chemicals to get to the exact specs to make it potable, and that the utility requires from them. Even that is a very important point. We're working basically for zero brine, which is the discharge. A gain, people think that you're discharging all the salt.
In reality, for every, and Bart knowing much better, correct me if I'm wrong, but for every cubic meter that you produce, you're actually reinjecting the water three. The increase in salinity is relatively small, and basically you have these dispersion studies way out in the sea. It's literally you are putting a drop in a big sea. All these studies show that the changing concentration of salinity is very limited. Here you have a picture of these corals. That's the experience in the Red Sea, which is really fabulous. There'll be a lot of corals. There's a lot of attention to that also. It's not that you go in and you excavate and put your intake works, but basically you take the corals, you put them aside, you treat them well, and then you build all your facilities.
You take it back, and you put it where they belong, basically, where they were before. All this basically shows that as an activity is in line or even lower than any other human activity that is performed. Next. I think next is for Bart.
Thank you, Marco. Thank you for allowing us to talk about our lead in technology. Actually, during lunchtime, we were discussing some of your CSP technology, batteries, redox flow batteries, electrolyzers. I was telling myself, in all my 30 years in the energy sector, in research, engineering, construction operations, it has never been more interesting than it is now. Because in our business, the transition which is happening is really, to a large extent, driven by new technologies. It is also one of the reasons why I believe ACWA Power is successful because introducing new technologies is really in the DNA of ACWA Power.
From the very early days, the success in desalination was to a large extent the result of the choice of moving from one dominant technology into another technology, the membrane-based desalination, when all of the world was still using thermal desalination technologies, using more energy, therefore more expensive. ACWA Power has been doing this quite consistently, and this has led to a certain number of landmark projects, which I think we have mentioned them all. The lowest tariff in solar PV, the highest efficiency or the lowest power consumption in desalination. We are now between below three kilowatt-hours for one cubic meter of water. 20 years ago, it would have been 20. Imagine the development and the innovation that is needed to bring the energy consumption of water desalination down by that extent.
By the way, it is also a very strong contributor to sustainable development because this is real energy efficiency. Lowest desalination tariff, the largest PV-CSP plant, which you have been visiting today. Our project in the Red Sea, which is not only the largest storage PV system, PV storage autonomous project, it is actually the one plant in the world where we don't rely on the inertia of a large grid to maintain the stability. This is fully using power electronics, and only power electronics in the inverters to make sure that we have a grid with stable frequency first time ever. Other examples are there. The number of robots for robotic cleaning, which we use systematically on all our PV plants. Not just robots, it is also equipped with sensing of the soiling of the PV panels.
Machine learning algorithms define which is the optimum cleaning frequency and the use of remote sensing in order to optimize your overall performance. Just an example. These things are really essential to the success. It was also last year, we were quite proud that it was recognized by Forbes. Actually, in a kind of comparison of companies within the Kingdom of Saudi Arabia, we came out fourth in our segment, which is energy and industry. I think I can name the first three, which were Saudi Aramco, SABIC, and Ma'aden. We came just after them being, I have to say, spending a little bit less on R&D than they do. Of course, this does not come automatically. You need to organize this. You need to prepare this. It is not sufficient to have a few passionate people who will announce a new project.
You want to introduce new technologies at scale, but also taking an acceptable risk, not exposing yourself to whatever can happen when you introduce at scale new technologies. We have organized, and we can go to the next slide. We have organized since a few years now, a very much structured approach to innovation and R&D. We have really anticipated quality innovation roadmap. It looks at what we need to do to be prepared to deploy the best technologies which will come to the market three to five years from now. It's not passive. It's an active development, but fully based on open innovation, meaning we don't have closed research labs with hundreds of researchers. Every single project in our roadmap is done with partners.
Partners can be national research labs, can be universities, King Abdullah University of Science and Technology, King Fahd University of Petroleum and Minerals, many other universities elsewhere, can be start-up companies, can be large industrial partners, leading companies in our sector. I can give many examples. What we do is, with those partners, try to cover the last phases of the development cycle of such technology. Because very often, technologies, they stay a bit too long in the lab, and they are not brought efficiently to large scale deployment in the fields. That's where we can help. It's not just testing a new technology, it's really co-developing a new technology. We've structured it in such a way it ends with pilot projects and demonstration projects. B efore that, there is co-development and collaborative R&D. Collaborative R&D with university labs, co-development with the start-up companies, and fully focused on two things.
Basically, one is operational performance, making sure that the technology has delivered what we expect and improving the output of the technologies. Second is competitiveness, because we operate in a competitive environment, and we want to use these new technologies before others can. Either because of the knowledge we have developed or because of the contractual arrangements we have been able to make around this collaborative research. 36 projects still ongoing, and you see the different It's still a little bit biased towards water and desalination, which we have the historical strength in research, and we're beefing up very rapidly renewables, already 25%. Digital technologies takes a big part of it. We do quite some work on AI, robotics, other digital technologies. Green gases, including hydrogen, with some demonstration projects, but also integration and hybridization. It's not only about the technology component itself. We build projects using different technology components.
The optimal way of integrating them or the optimal way of proposing hybrid projects like this one, where you combine three different technologies, is actually part of what gives us a distinctive competitive advantage. Then we do some work on other zero-carbon technologies, very much focused these days on energy storage. That is a high level overview. I will be more than happy to spend days on every single topic, but I think this gives you a view on what we do, really to make sure that not only now we are successful in bringing new technologies to the market, but also next year and the year after and the years after.
Next is people. We mentioned the priority that we have assigned to people. I will not spend a lot of time. I think in future updates we can go and drill down.
I think this is the scheme that we follow. First is the attraction, which goes back to we need to grow, we need to position ourselves, we need to explain better, we need to become a better brand. The second is the onboarding and integrating. We are spending a lot of time to make sure that once they come in, they get basically working effectively very soon. There is a combination of both the introduction into the system and the tools and the ability basically to make them usable, let me say, if you want to use this word, very soon. The next thing is developing and growing them, which I go back to the fact that I expect that we will lose people, because if you are the best, the people come to you to pick the best people.
We need to really develop the talent pool. We have recently rolled out a number of different programs, and I would like to make a quick mention about them, which is probably in the next slide. The first one is the top 50 people in the company, basically below the MC level, the management committee. If you go to the next slide, is basically a program that we designed and are delivering with IMD in Lausanne. The second one, and it is a year-long actually, yeah, more than a year-long program integrated with coaching and mentoring. I t is very, very deep program. The second one is a program that is designed for the second tier that we developed with University of Hull in U.K. This is tailored basically to, call it the CEO of the project companies and the project directors.
They are both of the people who will develop the technical and commercial skills to manage construction, to oversee construction, and the stakeholder management and the relationship with all the financial off-taker and all the others, including all the people in the company, basically, all the project companies. This is the second project. The third project is another 50 people for the more junior people, more junior talent. We have rolled out a graduate, a structured graduate development program with rotation for the people in different parts of the organization. We are also sponsor of the Energy and Water Academy here in Saudi Arabia and of Sharda University Uzbekistan. Those are the first two schools where basically we graduate about 800 people every year.
We do not take all of them, we just simply want to feed the pipeline for the industry because we believe that the more capital, human capital you have, the better it is for you to basically select the best and attract the best. I was recently at the graduation ceremony of EWA, and they told me that for these 600 people that they take on board every year, they receive 100,000 applications. It is a very, very selective program. The last two years, we also launched one program tailored particularly at female. Our participation of female in the company is still very, very low. It is less than 10%, so that is a big focus that we have. It is an industry that starts with not a lot of female actually to start with. I think the experience is that they are really probably the best contributor.
It is really something we want to foster more. Then of course, we have programs for localization of talent in most of the countries, which follow the regular process and basically working with the rest of the ecosystem in the countries basically to develop the local people. Next, I think here we are going to Abdulhameed Al-Muhaidib.
I conclude that from everyone. This session, to be honest, I want to make sure that you get the most of the team. I have been speaking with you on a quarterly basis on the earnings call, so I do not want to talk much on the finances. Mainly, I will leave the floor to my colleagues to give you more on the strategy, technology and sessions. I know that we will also have a Q&A session. We have a lot of people joining us online. I have 2.5 slides, I would say. One reflection of this year. One is on an outlook of what we have seen in the last two years since IPO, and one maybe just to give you a perspective on what we have achieved. The first one really, now we are in December, we are closing the year.
I think one of the great metrics that we have witnessed this year, to be honest, is the development side. The number of financial close is just remarkable. We have closed, I would say, 12 coming up to be 13 financial closes, more than SAR 60 billion of financial close. The best in the history of ACWA Power. If you go back in the last couple of years, you will see six to seven was the best result. A lmost we are doubling up from our best years. That is definitely a good booster to the upcoming couple of years in terms of doing projects. A few years ago it was six to seven projects under construction. Now we have 20 projects under construction at the same time. That is just remarkable in terms of boosting up our pipeline for the growth.
In terms of number of assets, I think where we left you last year, it's more than 12 projects additions. That brought us to 80 assets. We have talked about the generation that has been added, but just a quick reflection also, 10 gigawatt means almost 20% in one year in terms of growing the pipeline. That also gives a bit of significant to the growth that has happened in the same period. On the water side, we have added around 1.4 million cubic meter per day. That brought continued to let ACWA Power be the lead, I would say, company in the world when it comes to the water desalination. We are, by the way, very close to the largest government-owned desalination company. I think Saline Water Conversion Corporation today is around 7.8 actual production, not installed capacity.
That also give you a perspective that within the next 12- 14 months, we will definitely be the largest ever water company, both in public and private sector. Then in term of competitiveness, I think it's also important to highlight, and we have seen it this year and last year, that before we were focused purely on competitive bidding projects. Today, we have both sides working together, both in the competitive bidding and on the negotiated deals. The Public Investment Fund pipeline that Marco has talked about, the initial stage, the projects in our basket is larger than that. All these are negotiated deals but has a very large scale. A few weeks ago, we closed Public Investment Fund front three, which is 4.5 gigawatt. Just to put it in perspective, this whole solar park, Mohammed bin Rashid Solar Park is five gigawatt.
A single project is close to the full solar park, which is now already we are on phase 6 of it. That give you the level of scalability that we are talking about, and this is not the end of it. The 4.5 is also phase 3 of Public Investment Fund fund four coming up even larger, and we are expecting to reach the Vision 2030 target. That number will go significantly higher. Scalability is something that you'll see even coming up bigger and bigger. In term of numbers, I think we have lost couple of competitiveness, but we are now back on track. I think both the negotiated and the competitiveness we have been doing fairly well. We expect that we'll be more selective going forward given the significant pipeline coming up in all the countries we are operating in. Maybe move to the next slide.
I think it's just a highlights of a few things. If I would like to highlight some, I think definitely the annual report is one of them. This is important to you as well, that the team has really worked very hard internally coordinating a lot of data from different sides of the company to bring a very high-quality report, which is the annual report that we have shared with you. This has actually won some awards during the year 2023. A couple of others is water desalination. Taweelah definitely is a big one. Taweelah is the largest water desalination project we have ever built, and it's also the largest in the world. That is now almost coming to full operation. Today it's producing almost 90% of its capacity, and we are expecting it to be fully in operation within 2024.
Other project definitely NEOM Green Hydrogen is significant information. I think if you look at the number of financial close we had, this is the heaviest one, $8.4 billion financial close for the NEOM Green Hydrogen. Aside from that, also maybe we move to the next slide, where is a reflection of the two years, I would say, since the IPO. If you look at our 1,000 page IPO prospectus, we talked about couple of outlooks, right? On this outlooks, I would like to also reflect on what we have achieved and what we have actually failed to achieve. The first one on the progress is growth. I think we were talking about pipeline of 10 gigawatt. We have definitely achieved much higher than what we expected in the term of two years' growth.
We have, when it comes to the power side, more than 37%, and the water around 10%. You are talking about very close to 20 gigawatt in two years. That is definitely significant pipeline growth, and we have scored, I would say, better than what we have seen as an outlook. On the operating income, I think one of the statements we had in our mind that we would be doubling up our operating income in 2023, which is doubling from 2020. Few things happened here that I think we are clearly behind this. We would expect operating income for 2023 to be much lower than that target, and we have engaged with you in the last quarterly calls on the reason but I would like also to emphasize you that there is a couple of reasons for that.
If there is a pie chart and I would like to cut it into four components, I would say one component of the pie chart would be the interest rate. I think back in the IPO time until today, the interest rate has increased triple. For us, when we did the analysis even 1% increase in the interest rate is around SAR 140 million impact to our bottom line. Just a reflection of that, it give you the momentum of the operating income that we have lost on this aspect. The second, by chance, I will look at it is really COVID-19 and the impact to project under construction. Projects like this one, Taweelah, and I would say, Hassyan, and many others that was under construction at the time of the IPO, all of them have suffered from delays.
Few of them have made, I would say, as per the budget, but some of them had a cost overrun. We have lost some revenue on this project. This will contribute at least one quarter of, let's say, one quarter of the impact to the operating income. The third element, I will really put it onto the development. There has been slowdown in the development at that time, during COVID. Mainly two things, right? One is that delay on financial costs at that time, which has impacted our development fees, but also there was changes of, let's say, we have closed certain projects, but at the time of the financial close, the high cost of interest rate, the delay in the execution, the higher margin of the EPC contractors has made us close deals that with the lower return than what we had anticipated originally.
That kind of positioning that we had due to COVID-19, mainly, and the increase on supply chain costs has impacted us. I would say this would be the third, let's say, element to the difference in the operating income. The fourth one would be others. All other buckets would be together, G&A cost, other costs that has been impacting us will be the fourth one. This is, in short, the impact on the operating income and where we had lost it. If you visualize it, two of them is about timing. I would say the development part, definitely we can get it back, most of it, in the next two years. Interest rate, as you know, you can outlook that the minute interest rate will go down, there's an automatic improvement in the operating income, aside from the growth of the business.
We are carrying today a higher cost of all the ideas that we have in our balance sheet. The other two, I think it's something that we have to recover with the growth. Not that we can recover the cost overrun and others, except if you do a refinancing of this project in a couple of years. Equity commitment, we have done fantastically better than what we expected. We said 1.1- 1.3. I think this year outlook is around 1.5, and then we are expecting at least SAR 1.6 billion equity investment in the next six years on average. When it comes to lender to EOCF, I will not spend much time here because I already explained the impact on the OC operating income. R eally, the main thing aside from that is actually the growth.
Definitely with faster growth, our equipment will be higher, so we will be more leveraged. There will be a timing impact of, let's say, one to two years when we're expecting a higher lending to EOCF, compared to, let's say, a comfort zone of around 6x. When it comes to dividends, we did mention three years expectation of dividends of 6%-9% growth. We have delivered on that. The first two years has been completed, and we're expecting for 2023 to be also on track subject to the board approval. Decarbonization, we have done actually even better than what we expected. Whatever we have committed as a 2030 target, we are very close to it. Today we are at 45% against 50% target for 2030.
In term of reduction for carbon footprint, we have talked about a couple of examples like Shuaibah IWP, Hassyan, moving away from projects in Vietnam, which is a core project, and also working together with our off-takers to decarbonize the remaining heavy corridor assets. I think this is more or less all from the finance. I'm sure there's a lot of questions, which we'll go through it in the Q&A. M aybe if you, Marco?
Yeah, Marco.
Marco.
Yeah. This is just to bring it all together what we mentioned to you. I think the first point of one of the reasons for success is scale as a differentiator, and that is why I say that being a Saudi company and the Vision 2030, everything that is going on here, positions us to have a really great, unique relationship with other countries and with suppliers that we can leverage. The innovation that Marco described in all the technologies and that we continue to pursue. I come from Europe and utility background, we are always kind of like a fast adopter. Here we are the first adopter, and so that is one of the biggest thing that makes us very competitive. I think I will not spend a lot more time on all this.
I think we covered everything, but the last point that we did not maybe touch too much, but we did not mention all the financial closes we are doing. The fact that we are able to reach all these close, all these project financing, and then find partners on the equity, allow us to mobilize SAR 10 for every SAR 1 that we invest ourselves. I think that is what creates and really accelerates the growth potential despite if you compare us with the Aramco and SABIC smaller dimension, the ability to grow so much and to do so much more. With this, I leave it to Ozgur for the Q&A.
Thank you, Marc. Thank you everyone for excellent coverage. Now, I think we are opening the forum for Q&A. Azem, how are we managing the Q&A, the virtual ones, here? Say again? Why don't they come over here?
I think I take one point. I think there was one question already there. We will take questions from people here first, and then the virtual ones, audio call questions will follow.
Yeah. There's one question on the virtual platform. Maybe you can take it first, and then we can clear it out.
Yeah.
Who's reading the question?
Okay, I will read it out, Bart. Thank you. Can you speak about your battery storage plans attached to wind and solar? Are you buying batteries, installing systems yourself or partnering with other companies for the complete solution? The third part of the question is, are you working with Chinese suppliers here? Is there differentiation in battery storage solutions in the marketplace? What do you expect will happen in the storage space?
Okay, thank you. That is an interesting set of questions, but on a very relevant topic. First, it is correct to say that more and more large scale renewables projects will be combined with battery storage. The reason is integration, to make it possible for these very large projects.
When you talk about 1,000 megawatt wind in Kazakhstan or many hundreds of megawatts, often in relatively weak grids, you basically need to combine it with batteries to avoid the fast ramping up and ramping down, which would otherwise cause problems, stability problems. There the offtake will just prescribe a certain amount of battery storage, and it is combined. You cannot do the renewables project if you do not do the storage. Then, there are also many places in the world where with increasing renewables, increasing use of renewables, there is a need for storage or other solutions for when there is no wind or no sun. That leads to a demand for storage. There are many places where we work with that could be like from tidal, but there are also other places where large scale batteries are a good solution.
That will likely go into an IPP framework, which is the one we use for our renewables projects. There is a tender to come in Abu Dhabi, soon. There may be others to come in the countries in which we operate. Without putting a target on it, very clearly, this is purely part of what we will do. We have a very good position. We have the knowledge. We have demonstrated that it is possible. How do we proceed? In much the same way as we do a solar PV project. Meaning, we basically define the requirements for the batteries. We do the vendor qualification. We select the best vendors for every project. We negotiate the conditions. But then we still go to a specialized EPC contractor who wraps it all up from a contractual point of view.
Who takes the overall construction responsibility, but also who does the integration between the different parts of the project. Again, that is much similar to what we would do for a solar PV project. Suppliers these days, on all the projects we are working on, were Chinese indeed. If you look at the scale of the battery supply market and different parts of it, so cells, battery packages, and then integrated battery containers, because it is all of that. China is such a size that you have the same effect of having the best prices and a very good price quality ratio. I expect that actually to remain, with maybe localization like we see it now, in solar. Localization, not starting with the cells, but starting with the containers and then gradually moving back upstream in the value chain. T hat will take some time.
We do see prices going down. I think that was also part of how you see the evolution. We do see prices continue to go down because of scale effect in the supply chain, and there is still quite some room for technology optimization. There is clearly a choice for lithium-ion as the dominant family of technologies. W ithin that family, there is still a lot of room for improvement. Then there are some alternatives to lithium-ion which are being developed in the labs. F or at least 10 years, there is room for further cost reductions in battery. Maybe at some point, today the battery market is still very much a little bit piggybacking on batteries for electrical vehicles. Large scale storage projects are not the same battery packs, but the same cells as those which go into the battery packs for your electrical vehicle.
As long as electrical vehicle market will be as large as it is now and growing at the pace it grows now, we will continue to probably use the same technology. Then at some point, there will be a bifurcation, and we will have specific technologies for stationary storage like the projects we do.
I don't expect that to happen in the next few weeks.
Thank you, Bart. Any questions from here?
Yeah. Meyer from Arkham. You alluded to your fact that net debt to EOCF will reach over seven next year, which is well above the five to six target. How do you see this progressing to the six handle? Is that organic, thanks to the EBITDA growth this year forecast, and does that take into account the new CapEx plans you have? Secondly, on the back of that, obviously interest rates have moved much higher than anyone would have expected, right? At the same time, your cost of equity is much lower. Is there a rethink of, let's say, why not raise a bit of equity to improve these ratios going forward, given that the cost of capital has moved the opposite ways? Also, are you planning to improve your financial disclosure to provide more look-through leverage?
Because obviously in the SPVs, I think there's a one to three ratios as well, right? To provide that look-through basis would actually be helpful in terms of interest coverage or ratios that are relevant actually for financial persons. Yeah.
Thank you very much for the question. M aybe let's take it one by one. When it comes to several pipes. We are expecting now on average for the next several years, $1.6 billion of capital commitment for that $250 billion of portfolio to be achieved by 2030. Y ou are definitely right that this cannot be achieved with debt only. We have certain parameters, and we have to maintain our ratio on checks. A n equity raise is definitely required between now and 2030. I would expect that for the next several years, if it's not once, it will be twice capital increase, for us to achieve the $250 billion of portfolio, while retaining our ratios unchecked. In term of timing of these capital raises, of course, these are subject to shareholders' approval, board approval, and timing is a percentage of percentage.
We will come to the market in the right time, and we will go with this, I would say, capital increase. Definitely, other instruments remain attractive too for us, including debt issuance. We did Sukuk issuance earlier this year, and we will also continue to look at it as a different pool of liquidity in the next two to three years as well. In term of where do we see the net debt to be as a guidance, I think five to six remain low for such a growth requirements. I would say between six and seven. While yeah, it will go above seven and a half, seven to seven and a half, maybe in 2023 if we continue that growth and without a capital increase. U ltimately, when you do a capital increase, it will go down not to six or five.
It will go down much lower, right? From there, it start going up again as your portfolio. That is the way I foresee the outlook for the company the next few years. Timing, I think, yes, maybe the markets today is attractive, and to use, I would say, the share price as a currency for growth. You are absolutely right. O f course, this is subject to a wider discussion at the board and to see the right time for such a target, I would say. In term of additional ratios to be disclosed, I think more or less we are providing a big number of ratios together with the finances. U ltimately, as a guidance, we are preparing to consolidate and keep it limited. For our financial partners, which are lenders, we are keeping two ratios at max for them.
This is mainly for the, how you say, bond holders and also the senior lenders in ACWA Power landscape. F or investors, definitely we will maintain the ones that we are disclosing in, I would say, quarterly basis. The rest, I think it can be worked out. It is not really something magical. I think by the cost and our analysis that we are showing in the market, everyone can work out any ratio that they have in mind. We don't foresee or we don't see that we are required to put it under any call in a quarterly basis. I n term of, I would say, improvements into what we are presenting on a quarterly basis, one of the feedbacks that we continue to receive is that the outlook, people, analysts, investors would like to see more on the outlook.
What we are trying to do, and you have maybe seen so in the last quarters, that we're trying to put more information related to outlook, including what I have just mentioned in the last couple of minutes where I disclose more about what we are seeing as an outlook. We are still not there yet when it comes to disclosing net income target or profit income for 2024. I see ourselves gradually moving to that direction where we can give a guidance to the market for a 12-month rolling kind of targets.
Yeah. We have a question on the audio from Ricardo. Ricardo, go ahead.
Hi. Thanks for taking my question. A few questions here. The first one, you were quite vocal about the potential of the Chinese market. Would you mind just comment on how you see returns there, especially compared to Saudi Arabia? The second question is on water desalination, and you also mentioned on how much investments have you been directly to water desalination technologies. What is the potential that you see for further declines in desalination tariffs in upcoming bids? Then third, just following up on the previous question from my colleague, and you mentioned about potential capital raising in the future. Within this framework of a massive pipeline that you have, and the current interest rates, would it make sense to not pay dividends for a few years, or would you be willing to keep on paying dividends in the medium term until 2030? Thank you.
Okay. In terms of returns in China, what we see preliminarily, we are just entering, so we are starting to look at opportunities. We see that they are in line or marginally better than what we see in the Gulf, which confirms the attractiveness of the market. In terms of water tariffs, it is defined mainly by three things. The CapEx, the energy cost, and the efficiency. The efficiency, I mentioned that we continue to drive it down over time so that we will be positive. The energy cost, I think it has more or less bottomed out with the higher interest rates, and it depends country by country. If you go to Morocco, Senegal, or Egypt, of course, it is different than Saudi Arabia and the Emirates. A ll in all, we think that there is still room for improving for each country.
In the CapEx, we continue to become more efficient. We have ideas that sometimes are redundancies in the system that we are negotiating with the offtaker, whether we want a lower tariff or some backup in the plant. Those are all things that we continue to improve. In terms of the dividend, we took a commitment at the IPO, and so we intend to meet that. Then, of course, going forward, we will look at all the sources of financing and the returns that we can get for the financing. Of course, we reflect also the interest of shareholders. I think as Abdulhameed Al-Muhaidib mentioned, this is a growth stock, not really a yield stock. I think that the first three years were important to provide the reassurance and say, and to give the credibility in what we do.
I think that now we are increasingly demonstrated that we can grow, and the growth is attractive and so we should capture the opportunity. W e will keep all the options open. Okay, any other questions from the floor here?
Thank you, gentlemen. Anna Antonova from JPMorgan. Two questions from our side. First, on growth stocks, I understand that you do not provide a lot of detail, but you mentioned that you are aiming to triple asset under management by 2030. My question is, how should we think about this growth in terms of gigawatts? If I proportionate this amount, that means that ACWA Power by 2030 would be a 150-gigawatt project company. That is the first thing. Secondly, if you could maybe shed some light on how you see the future growth evolving across your main pockets, like renewables versus water desalination versus green hydrogen projects. W hat kind of share of future growth will be dedicated, what you see them targeting at each of these segments?
It would just be very helpful in just structuring how we should think about the growth and the vectors and the shares of relative technologies in your portfolio going forward. How we think about that. Thank you.
Yeah, let me take these. Unfortunately, I need to join another board shortly, so this will be my last question, then I give it to the team. As I mentioned, we prefer not to give the exact split because it depends on what the evolution will be. Of course, right now you see there is a huge amount of renewables and some combined cycles also. I think the short term, that will be the bulk of the growth. Water is depending on the industry. We are looking at opportunities basically from Morocco to Indonesia and China. I think that we have a potential basically in all the technologies to grow. It is not proportionate to the total number, but certainly it can be in line.
Thank you.
We have an audio question from the floor.
I see you.
Go ahead.
Thank you all for the presentation. Two questions, if I can, just on some of the financial targets again. The first one, you talked through obviously, the delta between your expectation on 2023 versus 2020. You also had a target, I believe, in 2027 of the sort of tripling earnings at the time of the IPO. Just wondering sort of where you see that 2027 number now. Also for 2030, if we were just to think about the earnings growth from here. The tripling of the AUM is probably about 20%-21% CAGR. Is that the sort of rate of growth of earnings we should be expecting through the second half of the decade?
Then the other question is just on returns, because we didn't really talk about this, but obviously at the time of the IPO, you had a hurdle rate of 15%, I believe, return on equity. I think it's fair to say that's probably come down a little bit given the rates environment. Could you perhaps sort of articulate where you see returns now for the project pipeline as you execute that. Thank you.
Thank you, everyone. I think given what we have seen in the last two years, it give us really a reflection that we had give a number beyond 12 months. D efinitely giving number by 2027 is going to be very challenging. I will, to be honest, not comment on a projection or expectation of 2027, but definitely what you have seen in term of pipeline that can give you an indicator on the expectation for 2027. T hat is on the growth. As I mentioned earlier, I think we are now discussing internally where we can give more of a guidance 12 months rolling guidance. This is something that we are still discussing internally, and we'll see how best we can start this rolling out.
We started last quarter by giving a visibility on active projects that we are working on, and definitely in the last two years, as we have a pipeline of negotiated deals together with the bidding, that give us more visibility in term of the growth momentum of ACWA Power. Now, when it comes to returns, we have not changed, I would say, our model of expectation. I think what we have expected or what we have seen earlier, which is 10%, kind of on a portfolio basis, will continue to be the case. If you have seen definitely projects outside of Saudi and UAE, which is in Central Asia, are giving you higher return. There is a higher cost of equity definitely there compared to project that we are working, say, in Saudi and UAE.
Water is giving you definitely better return than single PV projects or how say renewable project. On a portfolio basis, we are expecting the same kind of return that we have given as a guideline earlier. This is despite the fact that you rightly mentioned about the higher increase on the interest rate, which is mainly covered on the tariff as we are structuring these projects. Y ou have seen why we have reached a level of, let's say, SAR 1.1 or SAR 1.2 cents per kilowatt-hour on projects being covered, let's say at the time that the interest rate was low. Today, the same project we close it at SAR 1.6, SAR 1.7 cents, and this is mainly because of the increase of the interest rate. D efinitely increasing the interest rate will not take it from our return, but rather will keep the same margin that we had originally assumed.
I think these are the two points. Ivan, did I cover your points or do you have more questions?
No, that is fine for now. Thank you.
Thank you. Any questions from the floor here?
Salaam Alaikum. This is Ahmed from Morgan Stanley. Regarding the people programs, I saw two programs, one, the top 50 under the management committee, and another program with the whole university. I want to ask about the process of choosing the people. Is it a nomination based or is it an application based, and the application is assessed, and how is the processes done?
I'm sorry, but I know this is more of an internal one. We can take this later on, but I would like to open it up for investment-related questions. Thank you. Welcome.
Thank you. It's Asif Kirmani from ABCV. Keeping it away from the financial projections, how do you think about the competitive environment for your growth plans within the region as well as in China or other new regions that you're going into in Central Asia? The second question is, how do you think about technology innovation in the sectors where you're operating? You talked a lot about reducing cost of production in the various sectors. H ow do you think about the company playing a role in evolving or revolutionizing new technologies in the renewable space?
Perhaps I take the first question and then maybe anyone who'd like to add on. When you look at the competitive environment within GCC, you have seen that a couple of years ago, you have bids, you see a margin difference between the first and second bidder or second and third bidder with around 18%-20% margin. T oday that has really shaken down first because the number of bidders has increased significantly. Also when it comes to mainly PV or wind, you will see that it's very tight competition. I t's almost 2%-3% difference between the first time bidder and second. That has really made the market more and more competitive, and that's why also fairly settled technologies will have more bidders coming up and then also lower returns compared to a more complex project like CCGT or water desal.
When you go abroad, depending on the countries that you are in, you will see there's a number of bidders, but definitely the competitive landscape is still high. T hat you will see also the margin difference, and that's from above 10% between the first and last bidder. That's at least what I have seen in the last two years. Maybe I will leave it also to my colleagues, Thomas and Bart, if they would like to add more on this one. The second question for you.
And we have a written question here submitted by Andrew Edmondson, who asks, "Please discuss what-
I think you have to differentiate about what technology you're looking at and what market you're also looking at. It's clear that if you look at the last few years, it's been very competitive globally and basically across technologies. I think now you've seen a period of time where some have also been facing the consequences of interest rates increasing. You've had supply chain bottlenecks. The way I look at it, when we look a bit ahead, actually, I think it plays to our strengths that we have now the volume, that we also have basically the relationship with the EPC suppliers, that we can get the attention not only from the OEMs, but actually also from the EPC providers. That bodes well for what we are looking at. When it comes to PV, when it comes to wind, it is a bit more plain vanilla.
Of course, competition is pretty hard, so sometimes you have to be a bit patient and wait for the right projects, and some are a better place for you as a company. When it comes to green hydrogen, when it comes to water, it's a bit different. It's newer technologies where you can have absolutely benefits from your technology capabilities, from your track record. Of course, we are tapping into that expertise. We're trying to sort of combine that. As we heard earlier, you need to play, of course, also in the more mainstream renewable generation. That's very much a scale game. The others basically take a position and basically be a bit ahead of the curve. I think we are well-positioned, but competition is here to stay, of course.
One point to add, which is not new, but relevant for the most competitive, which is renewables, solar and wind. One of the distinctive competitive advantages, as I said, is scale. Scale is about procurement, and that's why we're actually moving now. We've reached the scale. We buy 15 gigawatts of solar modules every year. The largest PV supplier in the world today has an output of 99.0 gigawatts. It's relevant volumes we buy, and that is where we get the competitive advantage from those highly competitive markets. We buy by pooling everything together with framework agreements, which we didn't do in the past because we didn't have the volume. Now let me try to answer the technology innovation question. It's absolutely relevant. Clearly, what we do is not just incremental innovation, trying to get the price a little bit down.
There is still quite a lot of room for disruptive innovation in our sectors in general. It is not the same for the different businesses. I have to say a little bit at high level because we do not have the time to cut it up in very small pieces. If you look at desalination, we are more or less reaching the end of the progress you can do with membrane-based technologies. It is improving every year, but there is the law of diminishing returns, and at some point, the progress becomes smaller and smaller. We are there. We are still optimizing. We are doing things like improved operations, thanks to artificial intelligence algorithms, reducing some of the fouling, these kind of things. The room for improvement becomes smaller and smaller. There are disruptive technologies still on the horizon. We are actually working on two of them with collaboration agreements.
If it works, and that is not certain yet, it will give us a significant competitive advantage. We have secured some exclusivities around this if it works, but I cannot make a prediction. That is the way it works in innovation. You work on it. Some of them succeed, some do not. Then, combined cycles, turbo. That is similar. The current technology, the gas turbine technology, we are not increasing that much anymore, the performance. There is a competition based on how efficient you are in building a project. There is not that much technology development. After all, it is your gas turbine supplier who defines the competitiveness of the technology. We are not developing gas turbines. That is for the GEs, Mitsubishi, and Siemens, those sort of units. We work with them, but they are doing the development.
Then in renewables, there is still a lot of room to improve, purely technologically speaking.
I just want to take the example of solar. The entire industry has moved from P-type to N-type silicon with an efficiency advantage as a result. This is now becoming the standard, it is deployed worldwide. Very soon, the industry will move to tandem cells, where two different junctions are combined to get an even better performance. When this will happen, nobody can predict. That it will happen, likely to happen, absolutely sure because simply the entire industry is working towards it, and there is no fundamental physical stressors. I expect most of the progress to come is in hydrogen. We are only at the beginning, basically. We are only seeing the very first large-scale projects, and we are using a pretty old technology, which is reliable, alkaline electrolyzers. There are no alternatives. There is still a lot of room to optimize.
I do believe that going forward, you will see actually even disruptive innovation in the sense that the core technology we use now, alkaline electrolyzers, maybe in approaches two to three years from now, we would be using something else.
Thank you, Bart. We have two written questions, then I think we should close after that. Harry, if you could read them out, please.
Certainly. Our first written question here from Andrew Edmondson of Ashmore Investment Management asks, "Please discuss what you are seeing in terms of cost inflation in renewable project implementation. As you say, we should see cost reduction in BESS for some year, but it feels like EV in particular has bottomed out. How much potential is there for further unit and construction cost reduction, excluding increased financing costs?
The cost of the PV project is less and less determined by the cost of the PV module. There used to be a time when the PV module would be 50%-80% of your cost of the project. Now, speaking in general terms, it is not our specific numbers, but it is more like 25% only. E ven if the cost of the module will go down slower and slower compared to what it was in the past, there are still many other levers for optimizing the cost of an overall solar project. These are the trackers, these are the inverters, these are the cleaning robots, these are optimal siting methodologies. Y es, maybe the module cost going down will go slower and slower, but the efficiency will continue to increase. Billions of panels cost will continue to go down, and there are still many other levers. That is my view.
Thank you. Our next question, Robin Fiedler-
Let me add maybe a few points on this one. One, I think also the scale of the project will also play a role in this one. If it is a project of four gigawatts compared to 300 megawatts, the panels' cost as a percentage of the project cost will go to 50 a bit. To link it also to the question, why do we have this project with a long-term offtake out here between 25- 35 years? That evolution of technology does help us on the refinancing aspect. I can give you an example. For example, if there is a project that we are currently operating for a couple of years, maybe the first term or the second term of refinancing that project will include a replacement of the panels, increasing and upsizing the project.
We can definitely put it in the same land, develop the capacity, and build a case as long as it is aligned also with the offtaker requirement of growth and the sizing of the rest of the equipment, including the high voltage transformers and the grid to that specific size. Why we have kind of locked our tariff on this project, there are instances that currently we are negotiating with offtaker on potential refinancing opportunities, capitalizing on the evolution of technology in the last couple of years. Harry can go to the next questions.
Great. Thank you. Our next question from Robin Fiedler of Covalis Capital is, for NEOM, when will the bulk of thyssenkrupp nucera electrolyzers be ordered and tested at the project? 2025, or will that start in 2024?
I can also take this one. For the NEOM Green Hydrogen Company project, the one which was presented here, everything has been ordered to be clear. The first electrolyzer is actually already on site, but not yet installed, and will be part of an initial innovation setup and kind of an R&D setup where we will have a year and a half to really, I would say, play with the electrolyzer, but this will be about learning how to optimally commission the electrolyzer before we have to do at Hydrogen the 110 electrolyzers for the main project. The project remains on schedule.
Thank you, Bart. I guess that's the last question that we have. Yeah, just time for one more question from the floor. Anyone?
I can take one, sir.
In terms of miss for 2023, am I right in assuming, obviously, you didn't want to reconfirm your long-term targets, which I respect given the uncertainties. To understand the 2023 miss, I think am I right assuming that half of it will be recovered perhaps already next year? Is that optimistic? More or less half the timing half was structural cost, like cost of our own interest rates, basically. To rephrase that, what was the IRR cash on cash on your CapEx, if you put in place, obviously the 50% was the target, but how much is it reduced because of the structural factors, interest rates and cost of our own? Thank you.
I think when you look at 2023, we have already announced, let's say that Q3 numbers. Nine months is already there, so you have left with only three months, which is closing in the next couple of weeks.
What we are maybe already announcing, and we added already part of earnings call previously, is that the targets mentioned in the idea of doubling up the operating income, definitely will not happen, definitely. That is the miss that I just explained the details of the breakdown there. It will be difficult to break down the IRR perspective on these specific projects, and the reason for that is very simple. We have today around 70 projects that is committed. The project that has been impacted by COVID is around seven, eight. That specific project, yes, some of them has reduced their cash on cash, I would say, IRR, but others also has outperformed, and some other remained the same. The mix is difficult to give you a number of how much is impact there.
What I would say is that within the interest rate impact is around one quarter, I mentioned earlier. That is something that we are expecting to recover, but not immediately. I would wait for the interest rate to go down, and whenever the interest rate go down, this is definitely on the existing portfolio. This is improvement on the operating accounts for our division. This year, for example, a 1% increase in that space is SAR 150, but it increased more than 1%. If you say 2%, that is SAR 300 million. And SAR 300 million is almost, talk about 20% of bottom line last year. That is significant. And the unhedged position, while we are maintaining a very solid hedging strategy, with more than 70% of our portfolio is hedged. The remaining 30% or less, that is then hedged.
You can imagine if you have a more hedged position, how much is then hedged. Definitely, as we meet on a monthly basis for the hedging committee, we always look at the right opportunities to continue hedging the position. The good news is that most of these projects that we just announced, which is 11 financials, all of them, the minute we secured it, we hedge it, and the pricing of the hedge is already included in the IRR that we have built in. The number of projects is just getting smaller and smaller when it comes to the project that has been impacted. When it comes to next year outlook, I think this is something that will come to the market at a later stage and give more insight of what we are expecting in 2024.
I have a question about the NEOM Green Hydrogen project. Obviously the NEOM on one hand, green hydrogen as a market is still nascent and new in nature, and it is difficult to kind of predict the pricing over there, especially if it is in the medium term. How has this been taken into consideration when structuring the agreements with Air Products or sort of to ensure the profitability for ACWA Power entering maybe with the IRR threshold? That is one question. The other question is more general as to what are the expected risks that ACWA Power is expected to face or maybe could face over the coming five, seven years timescale?
On the first question, as far as the off-take price is concerned, I think that was clearly set with our off-taker, Air Products. Yes, that is based on as part of the agreement. That is the basis on which the project economies, the project finance has been established. That is basically the DSCR, debt service coverage ratios, and we hope that it will be as expected by the bank. It is not like a market driven, but it is rather a cost plus kind of a bit of a structure to get to what is the off-take price. The second question, I could not get it, sorry.
Thank you. Maybe just to complement the last point, we have also mentioned a couple of the earnings call that NEOM Green Hydrogen project for us is a first move advantage strategy for us in the green hydrogen. Our return as ACWA Power is definitely lower than our average, let us say, IRR that we take on other technologies. This is something that you should be aware of, and it is only the first project. Definitely, Marco talked about our second project, which is helping our NEOM for the green hydrogen that is on track to the average IRR we usually look at in other technologies. When it comes to risk, I think, look, there is a couple of risks that we are seeing as a challenge for ACWA Power going forward, and maybe the first one is the people risk.
Marco did highlight a bit on how we are doing and creating a people strategy and focusing on how can we develop our own people and building on that. Because with the growth coming up, we will need a lot of people who understand the business, understand ACWA Power DNA to help us grow the portfolio. That is the first risk that we are working on it. Definitely the second one would be the execution risk. Today, as I mentioned earlier, we moved from 7- 20 projects under construction. Projects under construction require a significant amount of focus.
Because once the plant is up and running, then it will be almost 80% of the risk is already innate, because the cost overrun risk is done, the execution risk is completed, the plant has passed the commissioning phase, which is usually a bit challenging period for the project, and then it is more of a normal operation where we are a bit comfortable with having Omar fully on board from day one of this project. Execution risk is definitely a second high risk that we are seeing. Continuous IRR at this high level will also be a challenge for legacy projects, of course. As I mentioned earlier, for new projects, we are not worried because as we are developing this project, we are locking our projects, and almost this project for the next four to five years are hedged. If it is not 95%, it is 90% during execution.
Then when it comes from execution to operation, this hedging ratio will go down to, let's say, average of 70%-75%. The current project under execution, we are not carrying any interest rate risk, but the previous projects, these projects are impacted by interest rate if it is continued outside. The minute it goes down far away, we do actually hedge our portfolio almost free. I remember that four years ago when the interest rate went down, we almost get to a level of 95% hedge of all the portfolio. We capitalize on these opportunities, but given the market, for example, for the riyals, it does not give you more than seven years hedge, so you automatically hedge for longer. For the development, we capture the opportunities as they become available. These are the three main, I think from my side.
I do not know, my colleagues sitting with that. Thomas, please.
I just wanted to add, I mean, of course, the execution risk is huge, but I think you should not underestimate the need for also having a very, very strong relationship with your suppliers. We have seen just back to Mohier point that there has been more demand than there is supply right now. That is, of course, something we need to manage very, very carefully, also just from a concentration perspective. That is one. Then, of course, part is also on top of that, but that is one we really, really focus on. Then I would also say that we are now also expanding a bit more, if not globally, then regionally and, of course, more markets we are now playing in. When you are growing in more markets, of course, you also need to pay attention to different regimes, if you will. It is all the classic things.
It is permitting risks, it is the political risks, those kind of things that we, of course, pay attention to when you start to move a bit away from your existing footprint ones.
Thank you. Let me close now. It's over to you.
I think-
Okay.
Yeah, I think it's time to close now.
Yeah.
Thank you, everyone. Literally everyone in the room, everyone on their screens, and also our management team. It was wonderful to hear all of your views. Any questions, any further insights that you would like to build on today or anything else, you know how to reach investor relations, most of you. Seriously, thank you so much for a long day. I hope that it was worthwhile. Thank you.